Comesa to treat Kenya Airways partnership with South African Airways a merger
The Common Market for Eastern and Southern Africa (COMESA) will treat the partnership between Kenya Airways (KQ) and South African Airways (SAA) as a merger due to its effect on regional competition.
Kenya Airways operates in COMESA member states; therefore, it is bound by the community’s regulations and has to notify the COMESA Competition Commission (CCC) of any impending mergers. According to the CCC, it is not the form or the strategy in which the two airlines approach this partnership but rather the effect it has on competition that will determine it as a merger.
The two flag carriers, which have been seeking partnership since 2021, have denied that they are merging, saying that the deal is a partnership in which they will use their existing assets. However, the CCC disputes these claims. CEO of the commission, Willard Mwemba, said; “The two may claim that this is just a partnership and not a merger; what we worry about is not the term they use or the form but the effects that the coming together of the two will have in the market.”
After struggling with debts and the effect of the COVID-19 pandemic, the two airlines decided to partner to maintain their reputation as some of the biggest carriers in Africa. KQ and SAA signed a Strategic Partnership Framework in South Africa in November 2021, which was expected to improve the financial viability of the two airlines.
The partnership would help both airlines increase passenger traffic, cargo opportunities, and general trade by taking advantage of strengths in South Africa, Kenya, and the continent at large. KQ and SAA included a codeshare agreement that would see each airline sell, under its own code, flights operated by each other. This would enable travelers to combine flight segments and baggage on a single ticket.
The Strategic Partnership Framework and codeshare agreement were built on a special agreement between the two stakeholders. KQ and SAA also signed a memorandum of cooperation that included a long-term plan to start a Pan-African airline group, which was expected to begin operations this year.
For years, both South African Airways and Kenya Airways have been struggling with debt and losses, which were worsened by the pandemic. As of November 2022, Kenya Airways’ debt amounted to $835 million in numerous arrears. The Kenyan government suggested a turnaround plan for the airline, which includes settling some of its debt and selling its 48.9% stake in KQ.
After operating on losses and taking the effects of the pandemic, South African Airways fell into voluntary business rescue and seized its operations. South African Airways had accumulated debts of up to $461 million, which were the government’s responsibility, according to the Department of Public Enterprises. SAA eventually emerged from voluntary business rescue and resumed operations in September 2021.
This strategic partnership would be helpful for the recovery of both airlines. Kenya Airways CEO Allan Kilavuka said that the regulatory requirements by competition bodies might hinder the process. Mr Kilavuka added;
“We wanted to see if we can share assets and other resources, but the authorities need to immunize us so that we can overcome hurdles that may come up with regard to antitrust and anti-competition requirements.”
